JUNE 1990 - VOLUME 11 - NUMBER 6
C O R P O R A T E P R O F I L E
BFI: The Sludge of the Waste Industry
by Brian Lipset
Browning Ferris Industries (BFI) is the second largest waste disposal firm in the United States. Some people know BFI by its blue and white garbage trucks and dumpsters, but BFl's neighbors know the company as one of America's most notorious polluters. Thomas Fatjo started the company as a waste hauling business in his Houston, Texas neighborhood in 1967. Since then, BFI has spread throughout North America from San Francisco to Boston and from Ontario to Miami. Today the company operates in several other continents as well, including Europe, Australia and South America.
Like its geographical spread, the range of wastes handled by BFI is wide: a joint venture called American Ref-Fuel builds and operates solid-waste incinerators; BFI Medical Waste Systems handles medical waste; and its CECOS division handles hazardous waste. According to BFI, the company collects garbage from more than 5.4 million homes and half a million businesses and operates 106 solid waste landfills. BFI also owns 49 percent of American Ecology, one of only two U.S. companies operating nuclear waste landfills.
BFI stunned the business community by electing former two-time Environmental Protection Agency (EPA) Administrator, William Ruckelshaus as its chief executive officer in 1988. Many industry observers wondered why the man who some call "Mr. Clean" would choose to associate himself with a company that has an extensive record of convictions and fines for violations of antitrust and environmental laws. The waste industry, however, brushed aside this question and heralded the appointment as a stroke of good fortune. Members of the industry saw Ruckelshaus as an asset in efforts to live down its nasty track record. BFI officials welcomed Ruckelshaus with open arms; they claimed he was "uniquely qualified" to steer the company into the nineties.
Ruckelshaus' qualifications are indeed unique. Senior BFI Vice President Harold Gershowitz put it best: "When Bill Ruckelshaus speaks on environmental issues, there's a wider group of people willing to listen." As a former EPA Administrator, Ruckelshaus certainly knows the complex regulatory landscape governing waste disposal. And, having acted as a campaign advisor to both former President Ronald Reagan and President George Bush, he boasts close ties to the White House. Ruckelshaus also maintains a close relationship with the current administrator of EPA, William Reilly, whom he recommended for the job. In addition, the Deputy Administrator of EPA, Henry Habicht, is a former business partner in the firm of William D. Ruckelshaus Associates.
Despite Ruckelshaus' credentials, BFI's critics point out that his leadership does not absolve the company of its wrongdoing. One EPA official said, "The jury is still out on whether this is a new, improved BFI or not." Will Collette of the Citizen's Clearinghouse for Hazardous Waste told Multinational Monitor that "Industry's strategy for the 90s involves a lot of creative packaging. In the plastics industry we've got so-called degradable plastic bags, in fast food so-called recyclable styrofoam and at BFI we have the so-called 'Mr. Clean' administrator." Ruckelshaus is expensive wrapping paper; in 1989, his first year as head of BFI, he was paid more than $1 million.
In spite of the hoopla surrounding Ruckelshaus' hiring, troubles continue to plague the company. On April 5, 1990, for example, Ohio Attorney General Anthony Celebrezze announced an agreement with BFI's hazardous waste subsidiary, CECOS, to settle a case concerning disposal violations at BFI's Williamsburg, Ohio hazardous waste landfill. In the settlement, BFI agreed to plead guilty to a criminal charge for illegally dumping toxic waste into a drinking water supply and to pay a total of $3.5 million in civil fines to the state of Ohio and Clermont County. The same day, BFI announced that it was selling its hazardous waste business and would pay a total of $295 million to close the Ohio landfill. BFI also made public its decision to sell its 49 percent stake in American Ecology.
Ruckelshaus explained the CECOS sales decision by saying that profit margins were no longer "attractive enough;" BFI's hazardous waste disposal operations have posted losses for the last two years and accounted for only 2 percent of total revenue. Though Ruckelshaus also claimed that the move was not a response to environmental problems, the evidence suggests otherwise. The disappointing profits maybe a result of the large fines the company has been forced to pay.
BFI's Niagara Falls hazardous waste landfill, for ex-ample, was fined $350,000 for violations and denied an expansion permit by New York State in March 1990. Similarly, BR was fined $2.5 million by the United States government and the State of Louisiana in August 1988 for 2,500 violations at its Livingston, Louisiana hazardous waste landfill. Also in Louisiana, the EPA fined the company's Willow Springs hazardous waste landfill $1.55 million in March 1990 for 1,400 violations.
BFI's deceptions and cavalier attitude regarding violations have provoked widespread enmity toward the company. To Peggy Frankland, a Louisiana grassroots leader, "BR means a once-pristine, rural, minority community ruined." She adds that the company displays a "total disregard for humanity, when they locate a hazardous waste dump 50 feet from someone's house. They told us they would build a resort and it would be beautiful. Then they took in an alphabet soup of chemicals and left it unfenced. Horses, cows, pigs, hogs, chickens have all died. Children could get in there too." " Local Ohio activist May Marshall expresses the frustration of many when she says, "We tried for 13 years to get county and state officials to do something. ... We had trouble with CECOS from the start. They did everything wrong. When they were given time to correct the problem, they did-nothing. I guess they thought they could get by with it."
Grassroots community groups throughout the country oppose many BR operations. When Attorney General Celebrezze announced the criminal conviction and civil fines for violations at the Williamsburg landfill, he credited community opposition. "The problems associated with this landfill have been a thorn in the side of local residents and state regulators. ... Because this matter is so important to local citizens, we have fought this battle through five long years of litigation. ... This case centered on one important principle — that corporations must be held accountable for their environmental practices."
BR's decision to abandon its hazardous waste disposal operations shows that when environmental laws are rigorously enforced, industry will not be able to afford to dump its waste in "cheap" landfills and incinerators. Grassroots activists argue that heavy fines dramatically reduce profits and eventually lead companies toward safer disposal techniques and waste reduction.
Despite the CECOS setback, BR remains a Wall Street darling. With its solid waste division growing rapidly, sales have increased by 400 percent in the last 10 years, to $2.55 billion. In that period, profits increased from $34 million to $262 million.
This rosy financial picture contrasts sharply with the environmental record of BR's solid waste disposal operation. BR was fined $400,000 and eventually paid $280,000 to Louisiana for "unsanitary" practices at its solid waste landfill near New Orleans and $150,000 for consistently dumping more trash than allowed at its Randolph, Massachusetts garbage landfill. Jerri Coller of Eden Prairie, Minnesota, the site of another BR mess, knows firsthand of BR's illegal practices. "In 1970, BR opened a dump, saying it would last 10 years. Two years ago, BR was shut down by the state because of an explosive situation caused by leaking methane gas. The landfill has polluted the groundwater, the Minnesota River and the largest urban wildlife center in the U.S. The site is on the Super-fund List. Now they want to double the size of the dump."
Ruckelshaus, however, dismisses such complaints. "Whether it's a wildlife preserve or burial grounds for minority citizens, [referring to a proposed landfill on the Quindaro archeological site in Kansas, where escaped slaves built a community] there's always something about a particular landfill that makes it objectionable to someone."
BFI's record of antitrust violations resembles, if not surpasses, its dismal environmental performance. Its anti-competitive schemes go back many years. In 1972, the Illinois Attorney General filed a suit alleging that National Disposal, a BR subsidiary, and 200 other garbage firms in the area had conspired to fix prices and divide up customers. The suit was settled when the companies agreed to pay a fine. Eleven years later, BFI pleaded no contest to price fixing in Atlanta, Georgia, where it had agreed with competitors SCA Services and Waste Management to rig prices and not to solicit each other's customers. In Toledo, Ohio, BFI pleaded guilty to price fixing with Waste Management in 1987. As a result, BFI paid $1 million in fines to the U.S. government and settled with the state of Ohio for $350,000. Attorney General Celebrezze described evidence which demonstrated that BFI was involved in "secret meetings, planned allocations of customers, marketing agents selling only to preselected accounts and unnecessary price increases."
Nineteen eighty-seven was a particularly bad year for BFI. In addition to the Ohio fines, a Burlington, Vermont court ordered BFI to pay $6.1 million in punitive damages to Kelco Disposal for illegally undercutting prices in an effort to drive Kelco out of business. BR appealed the Vermont fine to the U.S. Supreme Court, claiming the size of the fine was "unconstitutional." But the Supreme Court upheld the Vermont court's ruling that BFI "will-fully and deliberately attempted to drive Kelco out of the market" by undercutting Kelco's disposal costs.
BFI's antitrust problems are far from over. The company is the subject of ongoing grand jury investigations into antitrust practices in several U.S. cities. The suspected antitrust practices involve price fixing, customer allocation and curtailing competition.
In the garbage industry, some have claimed that these practices are associated with companies linked to organized crime. In 1984, FBI mafia witness Harold Kaufmann stated that price fixing in the garbage industry is based on "property rights." Organized crime dominates this system of "property rights," according to a report issued by the New York State Assembly Environmental Conservation Committee titled "Organized Crime's Involvement in the Waste Hauling Industry." Kaufman explained that customers, called "stops," are considered company property. If a competing hauler offers a lower price to a "stop," and takes the stop, the original hauler's property is considered to have been "stolen."
One of the trademarks of organized crime's involvement, according to the New York State Assembly report, is the ability to "dictate the price that the haulers will receive for their services." The companies, it says, use "the property rights principle to prevent the customers from switching to another hauler to obtain better terms. The haulers are assured a given territory in which to operate and are able to obtain higher prices for their services through bid rigging." Ruckelshaus bristles at the suggestion that BFI is tied to organized crime. 'There is absolutely no truth to any involvement by this company in crime of any kind." Kaufmann, however, says that BFI's relations with reputed organized crime figures call the company's integrity into question. "When I was a young man, my father told me that if you walk like a duck and you act like a duck, somebody is likely to call you a duck."
Speaking more explicitly on the criminal connections, Kaufmann testified under oath in 1984 to the New York State legislature that "Browning Ferris has sat with organized crime figures in New Jersey — Johnny Pinto, the Giantello family, Ducks Morante — and never did their conscience bother them enough not to take the profits." When the chairman of the New York State Assembly Committee investigating organized crime's involvement in waste disposal, Maurice Hinchey, asked Kaufmann, "You use the word 'sat,' and what does that mean when you say the Browning Ferris people 'sat' in New Jersey?" Kaufmann answered, "In other words, BFI bought these companies. The President of BR came down there and appointed Johnny Pinto as the Vice President. [Pinto] has been associated with organized crime for over 20 years and his father before him, through a company called Pinto's Carting, and it never bothered them in the least. When Johnny Pinto left, [BR] reappointed the Giantello Family, which has been under Property Rights for an-other 20 years. Then we have Ducks Morante, who is known in Jersey, and I call your attention to Carl Santino as an associate of organized crime, and these people are running Browning Ferris Companies."
BR, however, vehemently denies any connection, intentional or not, with organized crime.
The company's attitude is reflected by BFI General Counsel Howard Hoover's argument that "it is impossible for the company to keep constant watch on the actions of employees in each of its worldwide operations." Indeed, BFI's standard response is that its criminal convictions and environmental fines result from renegade employees violating strict company policies de-signed to prevent such illegal activity. This defense is fatally flawed, however. Either BFI is in control of its subsidiaries, which means company policy is ineffective in stopping repeated violations or it is not in control of its subsidiaries, which is hardly better.
The truth may be closer to what former BR President Harry Phillips told a reporter in 1979: "We don't think management in many cases is giving the personnel the right sort of standards by which they can measure them-selves and by which we can measure them." Two recent examples illustrate Phillips' point clearly. In the Kelco Disposal case, the U.S. Supreme Court upheld the $6 million fine against BR. However, instead of punishing the BFI official in charge, Michael Gustin, the company promoted him to regional vice president. A similar development took place in Toledo, where BR and Waste Management Inc. pleaded guilty to price fixing. In that case, BFI's Bruce Ranck was not disciplined. Today, he sits shoulder to shoulder with William Ruckelshaus on BR's Board of Directors as senior vice president in charge of solid waste operations. So much for setting the right example.
Brain Lipset is a research analyst at the Citizen's Clearinghouse for Hazardous Waste.